Harrah’s Taken Private

Harrah’s Entertainment, the world’s largest casino company, has agreed to a $16.7 billion offer from two private equity groups: Apollo Management Group and Texas Pacific Group.

The deal values Harrah’s at $90 per share and represents a 36 percent premium over Harrah’s share price on September 29th, the last trading day before Apollo and Texas Pacific first proposed a buyout. The group also will assume $10.7 billion in debt.

A special committee of Harrah’s board began talks after a December 12th deadline for offers. Penn National Gaming, a Wyomissing, Pa.-based race track and casino operator, was eliminated from the bidding with its reported mostly cash bid of $87 per share.

Harrah’s operates more than 40 casinos in 13 states, including Harrah’s, Caesars and Horseshoe brands. In Las Vegas, holdings include Harrah’s, Barbary Coast Hotel and Casino, Bally’s, Flamingo, Paris and Imperial Palace – which account for some 350 acres along the Las Vegas Strip. Harrah’s CFO Jonathan Halkyard told the Los Angeles Times he expects the current management team to stay in place along with growth plans already made.

The decision ends more than two months of silence following the original offer by Apollo and Texas Pacific for $81 per share.

The Harrah’s deal is the largest to take a public casino company private and ranks as the seventh-largest leveraged buyout in history, according to Thomson Financial.

In the meantime, Penn may still be in the market either for Harrah’s properties that may be shed during the transaction or for other casino companies.

"We believe other small-cap companies could now become potential candidates for acquisition by Penn National," said Morgan Joseph & Co. analyst Adam Steinberg in a research note. "These companies include Boyd Gaming, which we view as a smaller version of Harrah’s and which has very little overlap with Penn."